Friday Roundup: Chucky the Consumer Has Yet Another Sequel?

Friday November 13, 2009

CHUCKY THE CONSUMER HAS ANOTHER SEQUEL?

It’s also Friday the 13th and one of my favorite characters is back in the spotlight.

So, are you telling me on a day when Consumer Confidence drops below expectations and retailers' earnings reports are mixed, stocks rise led by the retail sector? Is that what you’re saying? Yeppers. The Street believes Chucky has another sequel on tap despite having no job or credit.

It can happen... really!

J.C. Penney (JCP) says, although things suck currently, profits and sales will be better in the future because... well, “every day matters”. Others, like Nordstrom’s (JWN), didn’t fare so well and Walmart’s (WMT) forecast and report the previous day was a yawner. But Dollar General (DG) came out with their IPO propped managed by Goldman Sachs among others which spiked on the open nearly 8%. Goodyear (GT) was upgraded by an analyst since, surprise, Chucky is probably buying more new tires than cars.

Also, Disney (DIS) reported better profits from important productions like ESPN and Desperate Housewives. I had drinks with Roy Disney at the Waikiki Yacht Club after the Transpac race in 2005 but we discussed ESPN, racing and Mickey. I mean, he was buying the drinks so any jokes about Desperate Housewives never came up.

Anyway, volume is light and the stock market remains firmly in the grips of computer driven programs fed by Uncle Sugar’s money printing and low interest rates. Breadth today was positive.

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Comments

[FB5000:]

Not enough charts. You really need about 20 or 30 maybe 100 more charts to really make your point effectively.

What was that again? Oh it doesn't matter. Not really relevant anyway.

Very informative. I really mean it.

Nov 14 10:13 AM

[The Recusant:]

Like "bankrupt millionaire," "jobless recovery" is also an oxymoron. To recover means to get back to where we were and rising double digit unemployment is an indication that we are still in recession. Regardless of all the positive charts that institutions and the government throw at us, it just isn't sticking. Go long gold, silver, and commodities because the next leg down is sure to be a whopper!

Nov 14 10:58 AM

[Nextel Acce...:]

Wow...Apple at 80 in March....wish I would have bought then!!

Nov 14 11:06 AM

[amgine:]

Here comes your 1930's breakdown.....

Nov 14 01:39 PM

[TeresaE:]

Retail yeah! All is right in the world.

Unless you realize that China has increased the cost of necessities (shoes, socks, kids clothes, pajamas, bandaids, shampoo) by about 20% and retailers are having to offer continuous large sales to get people in.

Or you discount the undeclared rise in prices and you take into account the Consumer Confidence survey and realize that there are many, many people (more than average by anecdotal evidence) that have decided the best deals and selection is happening now, so they are pre-buying for Christmas. (I am 95% finished myself and my list is 1/4th the size it used to be).

As for volume, come now. I just read a rousing piece at Yahoo Finance that says that volume is way up!

So, just whom should I trust? MSM? Fed? WDC?

Or my own lying eyes?

Tough one. Thanks for your usual great commentary.

Nov 14 03:23 PM

[hwyflier:]

Can you give a daily update on the Short Term Oscillator? This would REALLY be helpful.

Nov 14 06:11 PM

[rick12345:]

So tell me again why a few greedy wall street types should drive the market lower ? Who exactly would gain from a move downwards - stock holders, employees, creditors, investors ???? Tax payers may be funding this junket, but they're also the ones who would have suffered the most had the economy been allowed to deteriorate during 2009. I have money, so loosing my job 12 months ago hasn't really affected me, but I doubt if you could you say the same thing about a single income family struggling on minimum wages.

Nov 14 09:17 PM

[MPT failed:]

Isn't this a repeat of 1973-74? Market recovers almost to the old high, then breaks down and crushes all those who got in late, when it finally appeared safe?

Nov 15 08:33 AM

[bobbybutte:]

As a person who has achieved financial independence SOLELY from allocating capital and have writtena book and newsletter based on buffett's teaching let me add a few comments

first of all the author has some really cool charts here and while I am not a chartist I appreciate his detail to information

Fact is 70% of our economy is consumer driven

No offense but since 13% of the people have about 90% of the assets the consumer is MORE driven by the level of the stock market than unemployment

My brother is enjoying a 12 day cruise that he would not have gone on in March when his net worth was less than half of what it is now

Like it or not the governments excess liquidity combined with cheap money combined with attractive large cap stocks combined with the low alternatives for money markets and T bills combined with the fact that many will wait until 2010 to take gains means a higher market over the next 6 weeks

Once jan hits im not as thrilled but in the mean time there will be a shift from the higher beta names to the large caps

Nov 15 10:46 AM

[John Mylant:]

Yes, I always love your charts. And what a day for the stocks! How many more counteractions are we going to have?

John Mylant
mylantsmoneyblog.typep.../

Nov 15 11:52 AM

[User 515542:]

Okay, sure, you have a point. The market can stay irrational for a while. Six weeks, okay, yeah, sure, I'll buy that.

But remember that the 13% of the people with 90% of the assets have a much lower marginal rate of consumption. Joe Sixpack has been spending 110% of this paycheck for a long time and now either spends 80% (I'm making that figure up, but it's probably representative of de-leveraging) or doesn't have a paycheck at all. And I'm sure I don't need to remind anyone as to how equity prices can fly around erratically due to their relative sensitivity (versus debt) to changes in anticipated future cash flows. If the US economy is 70% dependent on consumer spending, and the middle class is cutting back on Christmas presents in order to save the house from foreclosure...

On Nov 15 10:46 AM bobbybutte wrote:

> As a person who has achieved financial independence SOLELY from allocating
> capital and have writtena book and newsletter based on buffett's
> teaching let me add a few comments
>
> first of all the author has some really cool charts here and while
> I am not a chartist I appreciate his detail to information
>
> Fact is 70% of our economy is consumer driven
>
> No offense but since 13% of the people have about 90% of the assets
> the consumer is MORE driven by the level of the stock market than
> unemployment
>
> My brother is enjoying a 12 day cruise that he would not have gone
> on in March when his net worth was less than half of what it is now
>
>
> Like it or not the governments excess liquidity combined with cheap
> money combined with attractive large cap stocks combined with the
> low alternatives for money markets and T bills combined with the
> fact that many will wait until 2010 to take gains means a higher
> market over the next 6 weeks
>
> Once jan hits im not as thrilled but in the mean time there will
> be a shift from the higher beta names to the large caps

Nov 20 03:18 PM

[ray majdalani:]

it's like taking a time machine back 80 years !!! SHORT SHORT SHORT

Nov 24 05:10 PM